Prepared
Floor Remarks by U.S. Senator Chuck Grassley of Iowa
Biden’s
Reckless Spending Will Hurt our Farmers
Wednesday,
July 21, 2021
To finance their big spending agenda,
President Biden and his allies in Congress, have called for over $3 trillion in
new taxes. They claim these tax hikes are targeted solely at the wealthy. However,
imbedded in their tax hike proposals is a direct attack on family farms and
rural communities.
If Democrats get their way, family farms
would be decimated through the enactment of a second “death tax” that operates
on top of the existing estate tax. This second death tax would subject the
paper gains of business and investment assets to tax upon transfer to the next
generation. At the same time, the current long-term capital gains rate would be
nearly doubled.
As a result, decades of paper gains in farmland
and other property could be subject to capital gains taxes at rates as high as
43.4 percent. Given inflation and the escalating value of farmland over the
past several decades, an average sized Iowa farm could easily generate half a
million dollar tax bill or more based on land values alone.
Moreover, according to an analysis by KPMG,
family farms captured both by this new “death tax” and the existing estate tax
could see tax rates exceeding 66 percent. That’s not taxation, its
confiscation.
Proponents claim this new tax is needed to
close a loophole that allows the appreciation in the value of property over
one’s lifetime to go untaxed. But, death isn’t a loophole and it shouldn’t be a
taxable event.
In fact, rather than solving a problem, this
proposal would resurrect failed policy from decades past. As part of the Tax Reform Act of 1976, Congress experimented
with a similar attempt to subject paper gains in inherited assets to tax. This
change was immediately met with outcries from farmers, ranchers and small
business owners resulting in its repeal a few years later.
As problematic as this change was for
farmers in 1976, what Democrats have in store would actually be worse. Where in
1976 no tax was due until an asset was eventually sold by an heir, current
proposals could result in a tax bill due in the year of death.
As it’s often said, farmers are land rich
and cash poor. This means it’s unlikely for the decedent’s estate to have cash
on hand to satisfy a six figure tax bill. As a result, all or portions of a
family farm might have to be sold off to satisfy an oversized tax bill.
This would endanger the continuation of
the family farm from one generation to the next. And it would devastate rural
communities along with it. As one recent study found, subjecting paper gains to
tax at death could cost as much as 80,000 jobs each year over the next decade.
To my Democrat colleagues, pursue this
policy at your own peril. I assure you farmers, ranchers, and small business
owners are paying close attention.